Legal updates covering current topics.
Reformed Finnish Anti-Money Laundering Act brings new obligations for many entities as per 3 July 2017
The Finnish legal regime for anti-money laundering has been reformed in connection with the implementation of the fourth Money-Laundering Directive (2015/849/EC). The new Act on Preventing Money Laundering and Terrorist Financing entered into force on 3 July 2017 and applies to all parties (entities and natural persons) having a statutory reporting obligation, such as, for example, banks, insurance companies, investment firms, gambling companies, realtors, auditors, lawyers and parties engaged in the business of trading in products, to the extent that a payment for such products by a customer is made in cash in an amount of at least EUR 10,000 (unless engaged in financial activities on an occasional or a very limited basis only).
The new legislation brings the following key changes to the Finnish anti-money laundering regulations:
(i) Obligation to draw up an individual risk assessment: Parties having a statutory reporting obligation must make a written risk assessment to identify and assess the risks of money laundering and terrorist financing. The risk assessment shall cover risk factors relating to i.a. customers, countries or geographic areas, products, services, transactions or delivery channels. Also internal policies, controls and procedures shall form a part of the individual risk assessment, the scope of which is determined by the size, nature and characteristics of the reporting party’s activities. The documents relating to the risk assessment must be approved, monitored and up-dated by a person belonging to the upper management such as the managing director, the board of directors or a signatory right holder. A written risk assessment must be put in place by 31 December 2017.
(ii) Obligation to declare beneficiary owners: All legal entities (with the exception of listed companies), must report their beneficial owners to a register maintained by the Finnish Patent and Registration Office (Trade Register). A beneficiary owner is defined as a natural person holding more than 25 per cent of an entity’s ownership or voting rights. If another legal person holds a share of 25 per cent of more in the entity, the natural person(s) who de facto has the right to make independent decisions in the holding entity must be identified. Also, when considering beneficiary owners, not only ownership and voting rights shall be taken into consideration but also, for example, the rights conferred by a shareholders’ agreements, bye-laws and other arrangements by which control de facto may be exercised. The registration obligation enters into force 1 July 2019.
(iii) Obligation to identify and keep information on a beneficiary owner: Any party that is under a statutory reporting obligation must also identify the beneficiary owners of its customers and keep adequate, accurate and current information on the identified beneficiary owners. The new register on beneficiary owners to be maintained by the Trade Register may be used in order to receive up to date information on such beneficial owners.
(iv) Obligation to establish independent and anonymous whistleblowing channel: Parties under a statutory reporting obligation will have to establish independent and anonymous whistleblowing channels for its employees for the reporting of suspected breaches of the anti-money laundering regulations.
(v) New tougher sanctions: The supervising authority is vested with the powers to issue penalty fees amounting to EUR 5,000-100,000 for legal persons and EUR 500-EUR 10,000 for natural persons. For severe breaches/neglects tougher penalty fees are available: credit or financial institutions can face penalty fees amounting to at most 10 per cent of their turnover for the previous year, or EUR 5,000 000, whichever is higher. Other parties under a reporting obligation can face penalty fees the amount of which can be twice the benefit derived from the act/neglect or EUR 1,000 000, whichever is higher. In addition, the supervising authority must publish its decision on imposing a penalty fee on its internet pages and have the decision available to the public for five (5) years. Only if it would be unreasonable to publish the name or decision of the sanctioned natural person or entity or if such a publication could endanger any official investigations, the supervising authority may decide not to publish the details or to leave the decision unpublished.
During the past few years the amount of reports made to the Financial Intelligence Unit (independent unit within the Finnish Central Criminal Police) has varied between 20,000-38,000 per year (some 37,000 reports were made in 2015). Of these reports around 10 per cent have been subject to further investigations. Especially banks, other payment intermediation service providers and gambling companies have been active in submitting reports.
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